Global Development, Infrastructure & Real Asset Strategist, Mark Burns, writes that tokenisation may improve the plumbing of an investment product, but it does not change the physical reality of the asset beneath it.
This distinction matters as fund managers explore tokenised structures for real estate, infrastructure and other real assets. A digital unit can settle quickly. The building, energy system, concession or operating business behind it still changes at the speed of surveys, leases, maintenance cycles, insurance renewals, planning decisions and capital works.
The conventional ETF model contains a useful discipline. Authorised participants can create and redeem large blocks of shares by delivering or receiving a defined basket of securities or cash. That mechanism helps keep the traded price of an ETF close to the value of its portfolio. It works because the underlying instruments are usually standardised, observable and capable of moving through established market infrastructure.
Physical assets do not fit that pattern. A property cannot be delivered into a fund with the same certainty as a quoted security. Title may be qualified. A condition survey can become stale. Rental income may depend on a small number of tenants. Energy performance may require investment. Insurance terms can change. A major component may be approaching the end of its useful life. Each issue affects value, cash flow and liquidity, yet none is resolved merely because ownership interests are recorded on a distributed ledger.
This is why tokenised real asset products need a physical authorised participant function. The phrase does not necessarily imply a new regulated entity. It describes a clearly accountable role that connects the digital product to continuing evidence about the asset. The function should sit within the product’s governance and remain answerable for the quality, currency and completeness of the physical record.
Before acquisition, that function would confirm investment readiness through legal title, valuation, technical condition, environmental exposure, operating contracts and the capital plan. After acquisition, it would maintain a governed evidence schedule. Occupancy, income collection, energy performance, insurance, defects, planned works and reserve adequacy would be updated at frequencies suited to the asset rather than only to the reporting calendar of the token.
The same function should test whether distributions are sustainable. A token may make income easier to divide, but it can also make an underfunded asset appear more liquid than it is. Cash paid out today may be cash that is unavailable for tomorrow’s roof, plant replacement or statutory upgrade. Investors need to see the relationship between distributable income, lifecycle expenditure and reserves, not simply a headline yield.
It should also govern material change. If a tenant departs, a defect emerges or an energy standard tightens, the product needs a defined route from physical discovery to investor disclosure. The responsible party should verify the event, assess its effect on income and valuation, update the capital plan and confirm whether trading or distributions require intervention. Without that chain, a token can continue to circulate against an asset record that no longer reflects the investment investors actually own.
Exit planning also belongs inside the design. Token holders may be able to transfer their interests rapidly, while the underlying asset remains difficult to sell. Research from the Bank for International Settlements has cautioned that tokenised real estate liquidity still depends on the forces governing the physical market and that liquidity backstops can create additional solvency risk. That is an important warning against treating digital transferability as equivalent to real liquidity.
Regulators are already advancing the digital side. The Financial Conduct Authority’s 2026 fund tokenisation guidance supports distributed ledger technology for unit registers and explores new dealing models. These developments can reduce friction and widen access. They also make it more important that the asset evidence moving alongside the digital register is governed to an institutional standard.
A credible product should therefore disclose who performs the physical authorised participant function, what evidence is maintained, how often it is refreshed, which exceptions trigger intervention and how conflicts are managed. Those responsibilities should be visible to the fund board, depositary, administrator, valuer and investor. Technology can then accelerate ownership and settlement without creating a faster route to stale information.
Tokenisation will earn confidence when the digital claim and the physical asset remain synchronised. The strongest products will not pretend that buildings and infrastructure behave like securities. They will use technology to make ownership more efficient while strengthening the governance that keeps value real.
